Classify Each of the Following Statements

question 7

Multiple Choice

Classify each of the following statements.
-Howard establishes a trust, life estate to his children, remainder to the grandchildren. Under its terms, the trust is revocable by Howard. Howard later relinquishes the right to revoke the trust.

• A)No taxable transfer occurs.
• B)Gift tax applies.
• C)Estate tax applies.

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Definitions:

Deferred Tax Liability

Deferred Tax Liability is a tax that is assessed or is due for the current period but has not yet been paid, often resulting from timing differences between book and tax deductions.

Economic Depreciation

A decrease in the value of an asset due to changes in market conditions or technology, as opposed to physical wear and tear.

Tax Deductible

Expenses that can be subtracted from gross income to reduce taxable income, effectively lowering the overall tax liability.

Tax Purposes

The reason or objective behind the implementation of taxes or certain tax guidelines, often related to income, business expenses, and investments.